GST was arguably the current government’s biggest initiative to streamline real estate purchase for taxpayers. The objective was to reduce applicable taxation charges to an extent that people can buy their dream homes in an economical price range. However, people still feel the need to reduce the payable tax as much as they can because why not? Considering that the real estate taxes vary in every state, experts at Modi Builders review some of the best practices to save money:-
How to save tax on real estate purchase?
Stamp duty Exemption
Expenses directly associated with property transfer like Stamp Duty and Registration Charges are liable to tax reduction under Section 80C. The maximum possible deduction is Rs 1.5 lakh and can be claimed in the year’s income tax return. The receipt of paid stamp duty and property registration papers (copy) are to be submitted so as to avail the savings.
- Affordable Housing Scheme
Government of India launched the Pradhan Mantri Awas Yojana as a catalyst to its vision of ‘Housing For All by 2022’. Potential homebuyers that belong to the Economically Weaker Sections or Low income Groups can avail a GST relaxation of four per cent i.e. eight per cent payable tax instead of the original 12 per cent.
In addition, individuals that have an annual household income less than Rs 18 lakh, better known as Middle Income Group 1 and Middle Income Group 2, are eligible for the aforementioned scheme. Dialogue is in process as the government is looking to waive off all sorts of tax applicable on these four categories.
Joint Home Loan
In a joint home loan, every involved individual can avail a tax deduction of approximately Rs 2 lakh on loan interest and nearly Rs 1.5 lakh waiver on the principal amount. In case you are looking to purchase ,say apartments in Hyderabad, study the specifications mentioned under Section 80C of the Income Tax Act and try to go for a joint loan.
Deduction of up to Rs 1.5 lakh is applicable to claim the principal repayment under Section 80C provided that the home loan is taken for the purchase/construction of a new house property. Furthermore, experts at Modi Builders state that this property cannot be sold by the owner before five years, counted from the date of possession. If not adhered to, the deduction will be re-added in the year of sale’s income tax records.
- Section 80EE
The recent addition to Income Tax Act enables every homeowner with only one house to enjoy a tax benefit of up to Rs 50,000. The condition is that he/she must have only one house as of the date of loan approval. In case one has two houses, read about the ITR-2 form.
Need detailed explanations on a specific deduction? Let us know in the comments below!